I bought a car for $38000 in 2015 and used it for uber. I claimed standard mileage deduction. I sold the car in 2020 for $6000. how do I calculate loss or gain?

[saboor-akbary]

What should I do with the $6000 of disposal of my car?

[ReneeM7122]

You will have to recapture the disposal.

If you sell business assets during the year, the deal may generate a taxable gain or a deductible loss. 

If you're selling or exchanging property, your gain or loss is figured by calculating the difference between the amount you receive for the asset and its adjusted basis. The adjusted basis of the property is its original cost, minus any depreciation and expensing deduction claimed.

Here is a TurboTax article about managing business assets.

Here is a link to IRS Pub 544, Sales and Disposition of Assets

[saboor-akbary]

Thank you for the information. But I’m still confused with TurboTax. Basically I drove 220k miles over 5 years and the mileages varied every years. And I used standard mileage deduction. 

I purchased it in August 2015 for $38000 and sold it for $6000 in September 2020. 220k miles on the clock. Can you give me a formula or a calculation method. Thanks  

[ThomasM125 · Accepted solution]

You would have to multiply your business miles each year by the depreciation equivalent factor for each year that you used the auto for business to arrive at the depreciation that would apply to the auto. The factors average about $0.25 per mile for the period of time you used the vehicle. 

So, based on the mileage you mention, it is likely the vehicle is fully depreciated. If so, then the basis would be $0, and your gain would be the $6,000 that you received. So, you would report the sale of the auto for $6,000 and enter the depreciation as the cost basis, which is the $38,000 times the business use percentage of the vehicle.

[saboor-akbary]

Thank you sooo much.  Now I purchased another car in September 2020 and used it for business with 5% personal use. I heard about section 179 

where I can claim the full cost of the car in first year. Or depreciate up to $10,100 . I’m lost . Can you explain please? 
Paid $37200 for the new car . 

best regards

[AmeliesUncle]

For the previous vehicle, did you have any personal use?  If so, you can NOT report it under the vehicle section.  You need to report it under the "Sale of Business Property" section.  And you need to MANUALLY calculate the business percentage.  So if it was 95% business over the entire time you owned the vehicle, you would multiply your cost and your sales price by 95%.

Is your new vehicle going to be used that much for Uber?  If so, you probably DON'T want to use Section 179.  The Standard Mileage Rate is usually much better for vehicles that have a very large amount of business miles.

[Cynthiad66]

Steps to take the Section 179 Deduction:

Your deduction will be limited to the amount of income from the business.  So if you are not seeing all of the deduction it could be limited to the income.

1. Click on Federal in the bar to your left
2. Under Income & Expenses tab at the top, click Review next to self employment income and expenses
3. On the screen Your 2017 self employment work summary, click Edit next to your business (if you have it  set up)
4. Click on Add Expenses for this work
5. On the screen Tell us about any expenses for business click on Vehicle and Continue at the bottom of page (Vehicle is in the Less Common Expenses near the bottom)
6. Did you use a car or truck for your business? Yes
7. On the screen Tell us about your business vehicle, enter your vehicle information
8. On the next screen, choose Yes I own this vehicle
9. On the next screen answer questions for Was this vehicle available for personal use in 2017?
10. On the next screen answer questions for Let's get some info about how you tracked your business and personal miles in 2017
11. On the next screen answer questions about How do you want to enter your mileage for your Truck? and enter your mileage
12. On the next screen answer questions How many vehicles did you use for your business?
13. On the next screen choose "I'll enter my actual expenses…
14. Continue answering through the screens, enter the purchase price of vehicle etc.
15. On the screen "How much do you want to deduct for the business use of this vehicle?" you can choose how much Section 179 deduction you want to take

Instead of depreciating an asset over a multi-year period, you might be able to deduct its entire cost during the first year of use. This is called a Section 179 deduction, also (erroneously) called Section 179 depreciation. Think of it as instant gratification when it comes to deducting the cost of a newly-purchased business asset.

Instead of depreciating an asset over a multi-year period, you might be able to deduct its entire cost during the first year of use. This is called a Section 179 deduction, also (erroneously) called Section 179 depreciation. Think of it as instant gratification when it comes to deducting the cost of a newly-purchased business asset.

What Is Section 179 Deduction

To qualify for a Section 179 deduction, the asset must be:

• Tangible (you're able to touch it, which excludes intangible assets like patents or copyrights)
• Purchased (not leased) for business use
• Used more than 50% in your business
• Placed in service (purchased, acquired, or converted to business use) during the current tax year
• Acquired from a non-related party

The Section 179 deduction can't be claimed for business assets that were acquired in a tax-free exchange or from a person or entity with whom you share a close relationship as specified by the IRS.